Despite its perceived blandness, insurance affects our lives significantly. Be prepared
Insurance is often overlooked among millennials. It’s not the flashiest industry, and its products don’t exactly inspire excitement. As a millennial myself, I’ll freely admit it. Despite this perceived blandness, however, insurance’s impact on our lives is virtually unrivaled.
Everyone experiences unexpected misfortune at some point—whether it’s a theft, flooded basement, or a house fire. Insurance provides not only peace of mind in such difficult situations, but also helps prevent the crippling financial losses these misfortunes would otherwise create.
Now, that said, there are many different insurance products, and not everything is essential. For that reason, I’ve handpicked three “must-have” products, with the thought that every millennial can benefit from one or more of them. Here goes.
If you’re renting your home, strongly consider renter’s insurance. It protects your belongings from theft, damage, and other calamities. Without it, if a break-in or other catastrophe occurs and your property is stolen or destroyed, YOU are likely on the hook to replace it, not your landlord.
Also, many renter’s insurance products allow a “personal articles policy.” This is a separate policy, which, at a minimal additional cost, provides extra protection for high-value possessions, such as a bike, jewelry, or musical instrument.
Let’s say, for example, that you have a renter’s insurance policy valued at $25,000, and your apartment burns to the ground, destroying everything in it, including your jewelry that would cost $5,000 alone to replace. Using renter’s insurance combined with a personal articles policy, your insurer could give you $5,000 to cover your jewelry, along with an additional $25,000 to replace your other belongings.
Lastly, not only is renter’s insurance relatively cheap, but it usually protects your belongings worldwide—even if you bring them with you on vacation.
Usage-based Insurance Discounts
Usage-based insurance (or, “UBI”) is an emerging product that stands to benefit almost everyone, while potentially disrupting the traditional insurance market.
Traditional insurance is based on extensive research about risk. Brainy math whizzes (called actuaries) use troves of data to predict a policyholder’s risk of misfortune based on multiple factors, such as their age or location.
To predict the risk of a car accident for a 25-year-old male customer, for instance, actuaries analyze data showing how often accidents occur among 25-year-old men nationwide. And this analysis, combined with other information, helps them predict the individual customer’s accident risk, which ultimately influences the cost (or, “premium”) that the insurer charges to the customer for the policy.
What’s different with UBI, however, is that the insurer bills the customer based, in part, on the customer’s actual behavior, not just an actuary’s prediction about the customer’s behavior. To do this, insurers use data-sharing devices placed in customers’ vehicles or homes to monitor, for instance, how many miles a customer drives, or, how often the customer activates their home security system. This technology allows for more accurate risk assessment, and customers using these devices typically receive a discount.
Rideshare Driver Insurance
As rideshare services such as Uber and Lyft have grown, many millennials have embraced a new job sector: driving for rideshare companies. The benefits of such employment are well known. Less known, however, is that driving for a ridesharing service is considered a commercial use of the vehicle. And personal auto insurance coverage—i.e., the coverage most people buy for their vehicles—usually doesn’t cover commercial use. This means that rideshare service drivers should buy a separate auto policy that protects them solely for ridesharing purposes, such as when driving a passenger to his or her destination. Otherwise, rideshare service drivers risk facing significant expense (and lawsuits) from accidents that occur while serving rideshare service customers.
Stephen L. Ball is Government Affairs Counsel for CSAA Insurance Group. A proud Wolverine, Stephen has a B.A. in Political Science and a Master of Public Policy degree from the University of Michigan. He also has a J.D. from Harvard Law School. For more information about Stephen, see his LinkedIn page.